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Oil Forecast December 26, 2011, Technical Analysis

By:
Christopher Lewis
Updated: Jan 1, 2011, 00:00 UTC

Light Sweet Crude The CL contract rose slightly on Friday as traders continued to buy up the market in response to the bombings in Iraq, the tensions with

Oil Forecast December 26, 2011, Technical Analysis

Light Sweet Crude

The CL contract rose slightly on Friday as traders continued to buy up the market in response to the bombings in Iraq, the tensions with Iran, and the uncertainty in North Korea. The market is currently attempting to break above the $100 level again. The market is currently forming what looks like either a bullish flag or a downward channel. With this in mind, the next few dollars will be very important.

The breaking higher above the $103 level would not only be a higher high, but a breaking to the upside of a massive flag that would measure a projected run to the $130 area. The markets would certainly be affected by a spike in oil prices, and in that scenario we could see a crash going forward. However, in the short-term, we think this would be very bullish for CL.

Oil Forecast December 26, 2011, Technical Analysis
Oil Forecast December 26, 2011, Technical Analysis

Brent

The Brent markets aren’t quite as cut and dry. The $105 – $110 area seems to be some kind of equilibrium for this market. The Brent contract has spent most of the last year in this general vicinity, and could continue to do so. The $112.50 level above is certainly resistive, and the level should continue to keep prices lower. The $95 level below is the absolute bottom of support in this market going forward, but we aren’t looking for a run back down to that level in the near term. The situations around the world right now are simply too volatile to think that the real risk is to the downside, although bad news in Europe will continue to keep the market down in general.

Because of the situation in Europe running simultaneously with the tensions in the Middle East, this market will continue to be very choppy. This could be because the Europeans tend to use Brent much more than the CL contract, and this will certainly be affected by recession in Europe more than the CL which is used extensively in the United States. With this in mind, we could see the spread between these two contracts tighten finally.

About the Author

Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.

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